Month: May 2017

It’s probably just as well that Queensland’s new Labour Hire Licensing Bill 2017, introduced into State Parliament (25/5/17) has been referred to the Finance & Administration Committee to report back by 24 July 2017. That’s a date that many of us will already have put in our diaries to check on where this legislation is headed. But, from what I can see so far, the Committee is going to have its work cut out for it, because it would appear that the drafting of the Bill does not match its intent.

First let’s recognise that the intent is laudable. The intent of the Bill is to protect workers from exploitation by providers of labour hire services; and to promote the integrity of the labour hire industry.[i]

But rather than identifying the industry role interfaces, where workers are most likely to experience exploitation, the Bill seeks only to license “the supply of workers”.[ii]

To do this, clause 7 of the Bill develops an omnibus definition of “labour hire services provider”, that appears to cover a wide range of workforce services suppliers including labour-hire firms (temp agencies) – but also, seemingly, workforce contractors (other than builders); group training schemes; and an unspecified (and little understood) class of labour intermediaries involved in the supply of workforce services or the use of auxiliary labour.

It’s the attempt to cover this unspecified class that it is likely to be the Bill’s undoing – at least as it stands at the moment – because, unlike the UK Gangmasters Licensing Act, upon which the definition appears to be modeled, the Bill fails to distinguish between the supply of a worker and the use of a worker[iii] in the intermediate levels of so-called labour-hire supply chains.

Let me try to put this in Rugby League terms that some readers might appreciate:

If you’re only the decoy runner in a cut-out pass, you’re not supplying the ball.

Moreover, the Bill makes no attempt to identify the circumstances in which a putative labour hire services provider might be materially involved such as to warrant the need to have a licence.

That failure produces some rather curious results. Let’s have a closer look at some of them.

We learn, from sub-clause 7(2)(a) of the Bill, that a provider provides labour hire services regardless of whether or not the worker is an employee of the provider.

Ordinarily, there would be nothing unusual about that. The provision clarifies that the formal distinction between employees and independent contractors is not important in this context.

However, it also points to the possibility that there may be no contractual relationship at all between the worker and the putative labour hire provider.

And that’s where things start to get tricky!

Sub-clause 7(2)(b) of the Bill goes on the say that a provider provides labour hire services regardless of whether or not a contract is entered into between the worker and the provider, or between the provider and the person to whom the worker is supplied.

Just think about that for a moment.

The distinguishing feature of a provider of labour hire services is that the putative provider supplies, to another person, a worker to do work.[iv]

How is that going to happen, and what type of supply is contemplated, if there is no contract between the worker and the provider; and no contract between the provider and the person to whom the worker is “supplied”?

Even accepting that there can be non-contractual supplies of goods or services,[v] and even accepting (for the sake of the argument) that workers could be equated to goods or services able to be supplied, something still seems to be wrong.

What the Bill is really trying to get at here, is a situation where the putative provider is materially involved, in some way, in the arrangement under which the worker performs work for the benefit of the person to whom she or he is supposedly “supplied”. But the legislation gives no proper clue as to what material involvement actually is.

The intent seems to be to catch buffered sub-contracting or pyramid labour contracting schemes that serve only to distance the point of employment from the point where labour is used.

But the Bill does not meet that intent.

There is no attempt to link the putative provider in any way to involvement in, say, the use, sub-contracting, or assignment of the contractual rights and obligations upon which commercial labour hire arrangements and pyramid supply schemes ultimately depend.

This situation is compounded by clause 8 of the Bill, which provides that a person is a worker for a provider if the individual enters into an arrangement with the provider under which:

the provider may supply, to another person, the individual to do work; AND

the provider is obliged to pay the worker, in whole or part, for the work.

So, on the one hand, we have the possibility of non-contractual arrangements (sub-clause 7(2)); whilst on the other, we have the need for an arrangement of some sort, coupled with an obligation to pay the worker for the work.

What sort of obligation is that, if it doesn’t arise from a work/wage bargain? Does the Bill rely on some sort of moral or equitable obligation to pay?

Had a thorough analysis been undertaken of the nature and flow of the rights and obligations that support commercial labour-hire arrangements, many of the difficulties which this Bill presents could have been avoided

Instead, we are left with what, in my view, is a seriously flawed legislative proposal, designed on principles that labour is a commodity and that workers can be supplied.[vi]

It should be noted that the Bill does provide for exemptions to be made by regulations;[vii] and the challenge for many will now be to examine what case they may have for exemption under Regulations that are yet to be presented.

However, that may be more difficult than it sounds, because exemption will only be granted where the supply of workers is not a dominant purpose of the business ordinarily carried on the business or class of business that seeks exemption.[viii]

Even so, it may be a long list because the list of exemptions under the Gangmasters Licensing (Exclusion) Regulations 2013 (UK) runs for five pages and includes such obscure classes as the use of a worker by a supplier of vaccines to perform vaccinations, and the use of a worker to determine the sex of chickens and other poultry.

Also keep in mind that the GLA only applies to agricultural work, gathering shellfish, and related processing and packaging work. Queensland has gone all the way and has not sought to restrict its licensing requirement to particular categories of work or industry sectors.

To find out where this all ends up, we will have to wait until 24 July 2017, when the Finance & Administration Committee reports back. That’s a date that many of us will already have put in our diaries.

It’s already in mine!

Andrew C. Wood

[iii] The Bill appears to borrow the key elements of its definition from ss. 4(2) and (3) of the Gangmasters Licensing Act 2004 (UK), which focus on the activity of supplying workers. It seems to have missed ss. 4(5), (5) and (6), which focus on the activities of using workers, other than in a supply situation, and which are essential for the effective inclusion of agencies that are involved in buffered subcontracting arrangements or the type of tiered or “pyramid” labour supply sub-contracting schemes, which the Fair Work Ombudsman investigated in its Chicken Processing Inquiry.

Maybe it’s just because State of Origin season is almost upon us again; but whatever the reason, it’s worth taking note of the interstate reach provisions of Queensland’s New Labour Hire Licensing Bill 2017, because being a cockroach (Queenslanders will know what I’m talking about) won’t help you.

That’s because clause 5 of the Bill provides that the new laws will apply outside Queensland “to the full extent of the extraterritorial legislative power of the Parliament”. Just what that means, exactly, is sometimes difficult to pin down; but those words signal that Queensland Government intends to push these laws as far as the Constitution will allow it – and that’s pretty far.

Keeping in mind that these laws are designed to “protect workers from exploitation by providers of labour hire services” *, it might be worth taking note of what the Queensland Court of Appeal said in another “protection” case – SBD v Chief Executive, Department of Child Safety[2007] QCA 318.

In that case, a child was found by police wandering alone along the Gold Coast Highway looking for his parent; the child told police that he was starving and could not remember when he had last eaten anything.

An application for a child protection order was subseuently filed in the Childrens Court in Queensland and served on the parent in New South Wales, where the parent and child were residing at the time.

A question therefore arose as to whether the Childrens Court in Queensland had jurisdiction, under Queensland legislation, in respect of the parent and child in New South Wales. The Court of Appeal, constituted by Keane and Muir JJA and Lyons J unanimously held that it did.

As you read what Keane JA said, try to keep in mind that this was a case about the reach of State laws for the protection of vulnerable persons (in this instance a child). Also keep in mind that the Queensland Child Protection Act, just like the Labour Hire Licensing Bill, was expressed to apply “to the full extent of the extraterritorial legislative power of the Parliament”.

Here’s what was said (with my underlining):

[29] Insofar as it is necessary to read down the general words of the Act to ensure a sufficient connection to Queensland to preserve its constitutional validity, sufficient connection exists where a child has suffered harm while he has been resident in Queensland or is at risk of suffering harm in Queensland having regard to his usual residence in Queensland. The provisions of the Act show that the purview of the Act and the associated jurisdiction of the Childrens Court are at least this broad.

[30] The notion of protection includes protection from harm as well as the provision of care for the child; “protection, of a child, includes care of the child”. The investigative powers of the respondent arise where the respondent becomes “aware … of alleged harm or alleged risk of harm to a child and reasonably suspects the child is in need of protection.”

…

[32] These provisions afford, in my respectful opinion, a clear indication that the purposes of the Act, and the related jurisdiction of the Childrens Court, cannot be defeated by the mere assertion that a child, who has habitually resided in the State, has been removed permanently from the State. A child who is within the purview of the Act as a child in need of protection because of harm which has occurred, or may occur, in Queensland, cannot be denied that protection merely by the removal of the child from the State. … it must be understood that the Act cannot responsibly be read down so as to allow exposure of a child to harm to continue in cases where a child is taken out of the State by the very person who is responsible for the harm suffered by the child. Whether a child is within the purview of the Act depends on whether the child has been harmed in Queensland, or is at risk of harm in Queensland.

Now, you perhaps only need replace the word, “child” in those passages with the words, “exploited worker” to get a sense of how the Bill is likely to be interpreted to ensure the maximum protection of vulnerable persons. Read it again with that change and see what you get.

The lesson here is that, whilst the Bill is proposed as Queensland legislation, it will likely affect every labour hire services provider wherever, within Australia, they may be located provided that there is a sufficient nexus with Queensland.

It will be important, therefore, that interstate labour hire services providers take note of the new laws and assess the extent to which they may be bound to comply with them if and when they are passed.

Clause 29 of Queensland’s new Labour Hire Licensing Bill 2017, introduced into Parliament on 25 May 2017, will allow the Chief Executive to impose conditions on a licence for any reasons and in any circumstances that the Chief Executive considers appropriate.

Those conditions expressly include a condition that requires a licensee:

to hold insurance of a stated kind and in a stated amount – that is to say a compulsory insurance requirement that is not necessarily limited to workers’ compensation insurance; but may extend to professional indemnity, public liability, and fidelity insurance

to lodge with the Chief Executive a security that complies with stated requirements – that is to say, a “bond” or “guarantee”.

I suspect that many agencies will be wanting to know a lot more about the policy guidelines (if any) that will inform the Chief Executive’s decisions on those matters!

If the conditions are imposed at the time the licence is granted, the show cause safeguards provided by clause 30 will not apply. The usual recourse that a disappointed applicant will have in that situation will be to appeal to QCAT; and possibly run the gauntlet of having some “interested person” apply to intervene or cross apply for review of whatever conditions are imposed – possibly seeking more extensive insurance, or a larger bond.

Given the broad definitions of provider and labour hire services set out in Queensland’s Labour Hire Licensing Bill 2017, introduced into Parliament on 25 May 2017, it will be interesting to see the extent to which common service entity arrangements for professional firms and corporate groups will be affected. The definition runs:

A person (a provider) provides labour hire services if, in the course of carrying on a business, the person supplies, to another person, a worker to do work.

The definition does not require that the business that is being carried on actually be a labour hire business in a sense that one might immediately recognise – merely that a worker is supplied by the putative labour hire provider in the course of whatever business it does conduct.

Many service entity arrangements are therefore likely to come under that umbrella; and they may be far removed from anything do with the labour hire industry as it is commonly understood. The service entities of medical, legal, and accounting practices may be just a few examples.

However, the Bill at sub-clause 7(3), does provide for the making of exceptions by regulations.

Get ready for a long list of regulations!

Andrew C. Wood

What a pity that the Labour Hire Licensing Bill 2017, which was introduced to Queensland Parliament today, advances core definitions that seem to be inconsistent with the ILO’s foundational principle that “labour is not a commodity”*.

The definitions of provider and labour hire services, which areset out in clause 7 of the Bill,run:

A person (a provider) provides labour hire services if, in the course of carrying on a business, the person supplies, to another person, a worker to do work.

Language matters. We reflect and construct meaning from the words we use.

It is disappointing, therefore, to see the extent to which proprietary language seems to have carried over as a legacy into a contemporary field of recruitment.

Language such as “candidate ownership”, “assignment”, “labour supply chains”, and “delivering or supplying workers” – even where used by enlightened human resources and procurement practitioners – hark back to a darker past and a flawed appreciation of the ILO’s foundational principle that “labour is not a commodity”.

It is more disappointing still to see such language promoted in this Bill.

The Bill provides an opportunity to set a new course in the way in which we describe important work relationships. However, it is early days and perhaps it is still not too late for the Queensland Parliament to seize it.

Firstly, they are a very timely resource in view of the FWO’s stated intention to extend accessorial liability to accountants & other trusted advisors.

Next, I really like the focus on inquiry, transparency, and the use of contractual controls, which the FWO prudently suggests users should have checked by their lawyers!

At the same time, I wonder if there’s a useful conversation to be had with the FWO about the architecture of these so-called “labor supply chains”; and whether there might be value in viewing them, not so much as a hierarchy of supply, as a system of co-ordinated roles.

The guides seem to focus on sub-contracting without differentiating it from outsourcing. Consequently, there’s a risk that the type of “sub-contracting” presented in the guides may not distinguish clearly between labor engagement roles (e.g. labor-hire and workforce contracting); labor sourcing roles (e.g. source/select/place); and labor management roles (e.g. contract management – including a variety of MSP & MVA arrangements). Additionally, workforce logistics roles (transport, accommodation, catering etc) & migration assistance roles seem to be “out of view” of the type of labor sub-contracting presented in the guide. That’s important because exploitation is possible at any of those role interfaces.

To illustrate the point, it would be possible for a workforce contractor, who was using the template questionnaire, which the FWO has produced, to respond to the first question in the following way:

Q: Do you subcontract any of the services you provide to us? If yes, briefly state why they are independent contractors rather than employees…

After that, the answer to every other question is either, “no” or, “not applicable”.

Without differentiating between sub-contracting (i.e. passing responsibility for part of the contract works to someone else) and outsourcing (i.e. acquiring services to enable the contractor to focus on its core contractual responsibility), the information that the FWO’s template question won’t solicit, and the answer won’t tell, could be:

A (cont’d): But to do it, we’re going to acquire labour-hire services from a firm that acquires its placement services, payroll services, contact management and workforce logistics services from X, Y & Z.

So, there might be a strong argument as to why a system of roles approach to the challenge that is presented by the exploitation of supply chain labour might offer considerable advantages over the hierarchy of supply approach evident in the FWO’s treatment of sub-contracting.

Finally, it’s a pity that we continue to speak of “labour supply chains” and “providing workers”, as though labour and workers were commodities. What is needed, I think, is a more sophisticated analysis of the auxiliary workforce services networks that support supply chain operations. At those points in the guide, where the FWO departs from supply chain language and adopts network language, the case for taking “practical steps… to minimise …legal or reputational risks” is far more compelling; and the measures suggested by those steps are much more within reach .

Lately, I’ve being hearing a lot about so-called “labour-hire contracting chains”[ii]. But I really wonder whether, like the Emperor’s new clothes, they might be “the train that isn’t really there” – at least as regards the purported on-hire “supply” of employees[iii] via labour-hire chains. Here’s why, in twelve points of contention:

“Labour is not a commodity”.[iv] That’s not so much a legal principle, as description of the special characteristics of labour. It’s also the foundational principle of much of the International Labour Organisation’s charter and its decent work agenda.

This is reflected in the notion that the employment relationship is a personal relationship that arises from a relational contract.[v]

As stated by the House of Lords and the Australian High Court, “No employee is an asset in the employer’s balance sheet to be bought and sold”.[vi]

So, perhaps we need to re-think what REALLY happens under a labour-hire contract; because it’s quite unlike hiring a piece of industrial equipment, or a car.

A labour hire contract is NOT a contract by which a labour-hire firm promises to “supply employees”. That is because employees are not “supplies” – see points of contention 1, 2 and 3. But, unfortunately, that’s the language that is commonly used; and it leads to all kinds of misconceptions that basically view employees as property.

A labour hire contract is BETTER CONCEIVED of as a contract by which a labour-hire firm promises to exercise its relational control[vii] stemming from a contract of employment in order to have its employees present themselves to perform work under supervision and direction and at a place usually determined by the client.

If a putative labour-hire company lacks the requisite relational control in the case of workers, who are employees – e.g. because it is not the employer – whatever else it might provide, it does NOT provide a labour-hire service. That is because it cannot “on-hire” those whom it has not hired.

If that is so, what purports to be a labour-hire contract between supplier and client where a labour-hire chain is involved, upon closer analysis, may sometimes prove not to be a labour hire contract at all.

If the supplier fails to supply that which it has agreed to supply, the contract may be set aside; and in some cases, will be ignored by the Courts as they seek to find the true employer… who could be the client.[viii]

Where the putative employer purports to pass relational control to another person to exercise for that other person’s own benefit (or even as purported agent for the putative employer), the relationship between putative employer and putative employee can become so attenuated that it ceases to bear any resemblance to an employment relationship. See point 2.

If the putative employee is bound to the service of a third party, to whom the putative employer has passed relational control, the relationship begins to bear the hallmarks of contractual bondage.

The doctrine of joint employment provides no solution in Australia; because, whilst it is still considered in some quarters to be an open question, Australian employment law has not adopted it.[ix]

So, what’s to be done? Here are some practical steps that employment services providers and their clients might take to make sure that they not left exposed.

Know what services you’re actually supplying or acquiring. Don’t stop at whatever label happens to be given to them. Go deeper and look at the real nature of the services. Examine their legal substance and ask if they stack up.

If you find that you are involved in a labour-hire contracting chain, make sure you know where your workers are coming from and how they get there.

Beware of extended contracting chains with weak links that don’t seem to add any real value and seem only to add cost, or to distance the point of engagement of your workers from the point where work is performed.

Be prepared to discover that some of the participants in your contracting chain, despite what they might call themselves, are not labour-hire agencies at all; but could be some other type of labour intermediary – e.g. sourcing/placement agency; workforce contractor; or contract management company.

If you are unsure of the nature of the services in your contracting chain, seek professional advice from someone, who can undertake the legal analysis necessary to make a correct identification.

Make sure that your contracts and terms of business support the type of transaction in which you re actually involved.

Beware of “templates” and “standard form contracts” that might not really be suited to your actual supply situation.

Once you know how your service network is constructed, make sure that you have in place a range of contractual and other controls that can provide adequate assurance that the suppliers you are dealing with are reputable; that any risk of exploitation is properly controlled; and that amelioration measures are appropriate. Robust certification schemes and resources such as the Fair Work Ombudsman’s new guides to labour contracting can help.

And, lastly, when in doubt, seek expert guidance.

Andrew C. Wood

[ii] An arrangement by which labour-hire firm (A) sources workers from labour-hire firm (B), which employs the worker and purports to “supply” workers to A for on-hire by A to A’s client. In Australia, such “chains” have been discovered to consist of as many as seven “links” before the original employer can be identified. The arrangement can be problematic because, in cases where it is misused it serves to distance the point of employment from the point where labour is performed. This type of buffered sub-contracting makes little or no value contribution. It draws value out of the supply chain, adds cost, and creates a next-to-impenetrable cloud around exploitative employment practices. In short, it lacks sustainability.

[iii] The position as regards independent contractors, whose services are on-hired through labour-hire chains, may be different and warrants separate consideration.

[vii] This is the type of lawful authority to command so far as there is scope for it that is derived from the contract as discussed by Dixon CJ, Williams, Webb and Taylor JJ in Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561.

[viii]Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37 per North and Bromberg JJ at [paras 215 to 218]. Although the orders were varied on appeal to the High Court, this part of the Full Court’s decision was not disturbed.

In this, the fourth installment in our current series of Supply Chain Conversations, during which RCSA’s CEO, Charles Cameron, has been posing a number of questions about the involvement of workforce services firms in supply chains, we examine the coverage of RCSA’s Certification Program, looking at some non-traditional labour supply arrangements and asking, “Who’s in; who’s out”.

CHARLES: Andrew, I have some examples of non-traditional labour supply arrangements in Australia and New Zealand. Can you describe how, under the RCSA certification model you have devised, each would be covered, if at all? Continue reading →

RCSA’s CEO, Charles Cameron, has been posing a number of questions about supply chains for me, lately. In this series ofSupply Chain Conversations, we explore the involvement of recruitment and workforce services firms in supply chain operations.

Our third conversation reveals how certification of workforce services providers, who exercise good stewardship over their service value networks, can contribute to better supply chain labour governance and trigger a collaborative “race to the top” that harnesses the power to convert a supply chain, one link at a time.

CHARLES: RCSA is currently developing a certification program to make it easier to make clean and ethical workforce services buying decisions which, in turn, will force change in the market by ensuring unethical and non-compliant providers don’t win work. This program incorporates the concept of a ‘service network’, where workforce services providers are part of a ‘service network’ and have to use their control or influence to enhance supply chain labour governance. Can you explain how this would work? Continue reading →